Saturday, 14 July 2012

Islamic finance strong alternative to face economic crisis

Malaysia is unique among Muslim countries in operating both conventional interest-based banking side by side with Islamic finance.

In the past decade the industry has made steady inroads and now accounts for 20 percent of the local banking assets.

And in these times of economic uncertainty, it is not just consumers but also governments and major corporations that are looking for funding through Islamic channels, which are not just profit driven but based on ethical considerations.

Dr Soualhi says Malaysia has put in place a strong regulatory, legal and Shariah framework. That has helped Malaysia become the largest issuer of sukuk or Islamic bonds in the world, to the tune of 150 billion US dollars.

It's also gaining reputation for coming up with new Shariah-compliant products and services, as well as becoming a hub for education specializing in Islamic finance. But some people in the industry say there is still plenty of room for improvement and growth.

Islamic finance is one of the key areas the government has identified to move the economy forward. Globally the industry is worth an estimated one trillion dollars and expected to grow by at least 25 percent a year.

Although Malaysia is one of the leaders in Islamic banking, it also faces stiff competition from even non-Muslim players like London and neighboring Singapore, which are keen to grab a slice of the Islamic finance pie.